Benefits of Centralized Financial and Accounting Processes
Updated: Mar 19
As organizations grow, the operational and logistical intricacies of procedures such as accounts payable and receivable, cash flow, billing, and payroll can become expensive and burdensome. When this happens, it is probably time for a reexamination of how these processes are handled. Some questions to ask include: Should a consolidated financial system be set up by procedure or by branch? Should each branch have a controller? Can a manager handle two or three stores at the same time? Roles can become easily jumbled up – especially when the sophistication and actual processing of financial systems vary from branch to branch. A rising amount of organizations are changing over from location-specific finance functions in favor of a centralized service model, where all core process areas are operated out of a common office or service center.
A centralized finance process is the consolidation of financial processes from numerous sources to a single point. It empowers organizations so they can implement standardized and optimized financial services for departments within an organization despite coming from an individual source. As a result processes requiring the movement of money can be optimized for productivity. For example: the procure-to-pay (P2P) process has great potential for enhanced efficiency. P2P is an area where traditional and manual processes can cause inefficiencies and as a result, high costs. Fortunately, with high costs comes the opportunity for vast savings. It can be said that the automation of processes is an essential part of a centralized finance group and is proven to yield impressive cost savings, better efficiencies, and greater transparency in operations.
In addition to the possible reduction of cost, centralized finance and accounting can offer the following advantages: enhanced reporting accuracy with strengthened internal controls; more efficient monthly reporting; ease of centralized information and processes across locations; enhanced roles and responsibilities connected to the opportunity to attract, develop, and retain talented employees; process standardization yielding more accountability; and consistent performance measurement.
Given all the benefits, there is of course no shortage of challenges especially for organizations with multiple offices across different geographical districts. Some of these are: a lack of control over finance activities both locally and across the entire organization, inconsistent processes, and diverse systems in place can be difficult to manage. In consequence, these organizations are faced with high costs because of slow and inefficient practices; stunted growth due to the time-consuming and difficult nature of establishing new finance functions and processes; and poor reporting abilities which lead to deficient decision-making and inaccuracies. Centralizing finance functions is an effectual solution to reduce labor and overhead costs, homogenize routine tasks, and earn a clear view of the organization for improved reporting. Automating routine procedures helps organizations impact investments in centralization and gain bonus benefits—including enhanced control over spend, quicker invoice processing times, and greater worker efficiency.
The centralization and automation of finance is a change journey. When centralizing finance processes, it’s vital to prepare accordingly in case the shift in culture upsets the effort put in. Specifically, communication surrounding roles and responsibilities needs to be clear. If clarity in that area is lacking, the centralized financial project will likely fail. Furthermore, there needs to be support from Accounting and Operations. A shift in structure this noteworthy takes time and needs to be carefully thought through to achieve success. Many factors need to be taken into consideration when deciding if a centralized finance process is the right move. Since a business owner can’t just snap a finger and expect the centralized system to be in full swing the next day, adequate planning is key. Between ensuring leadership buy-in, navigating the right time frame and phase-in approach, and remaining on top of continuous communication to all affected parties– the consolidation road map can take a few turns. Nonetheless, there is not a one-size-fits-all approach. The implementation processes will differ depending on the group. Having the right team in place to help guide the process is essential in the overall success of a well-run centralized financial system. To make sure that optimal results are achieved, it is imperative that organizations properly set up for victory and mobilize the change. For leading organizations, the automation of processes is the crucial way in which success can be achieved quickly and easily.
Gaining a perspective over the financial performance of an organization with operations in different geographical headquarters can be an enormously complicated task. In addition, there is a lack of standardized procedures which results in inefficiencies and consequently drives up costs. A centralized financial process is confirmed to avert redundancies, save money, and provide a consolidated view of the entire organization’s finance ventures. To ensure ownership of the project and continuous success, centralizing disparate finance functions is ultimately a change management process and requires agreement from the organization heads from the very start. Process automation is a required step in reaping the numerous benefits of centralization, as well as full visibility and increased productivity and control over financial processes. P2P automation seamlessly integrates with any existing ERP system and delivers optimized matching, requisition, approval, analytics, and invoice capture, allowing finance teams to complete tasks quickly and accurately and focus on strategy rather than spreadsheets.